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4.1. The 'ECHO Affair': case history
4.2. Issues arising
4.3. Conclusion: responsibility of Commissioners
4.1.1. ECHO, the 'European Community Humanitarian Office' was set up on 1 March 1992 to give the European Community a more specialised and effective means for providing aid in emergency relief situations. Experience of previous humanitarian emergencies had taught the Commission that its usual administrative mechanisms were too slow to provide assistance with the necessary speed, and, incidentally perhaps, they failed to give the Community contribution to disaster relief a visible dimension commensurate with its scale. ECHO is a directorate within the Commission under the administrative authority of the Secretary-General.
4.1.2. Initially under the responsibility of Commissioner Marín, and from 1995 under Commissioner Bonino, ECHO has responded to a series of well-documented emergencies in places such as Bosnia, Rwanda, Afghanistan and Colombia. During the first six years of its existence, it disbursed some ECU 3 500 million in aid. By and large, it has done so through partner organisations (NGOs and others).
4.1.3. The ECHO case revolves around four contracts awarded in 1993 and 1994 for the provision of humanitarian aid operations in the former Yugoslavia and in the Great Lakes region of Africa. These were awarded to three companies: of those three, two were subsequently shown to be controlled under fiduciary arrangements by the third, based in Luxembourg, a company which, moreover, directly and through associates, had a long-standing relationship with numerous Commission services. It was established during 1997/8 that these contracts were entirely fictitious, in so far as none of the activities or purchases to be financed under the alleged contracts - and indeed subsequently reported to the Commission - existed in reality. The total sum involved, ECU 2.4 million, thus represents irregular expenditure.
4.1.4. It transpires that the money in question was used in part to finance a group of eleven staff (the intra muros 'external cell') working as a financial unit within the administration of ECHO in Brussels. These staff were legally employed by the contractors, but they were often proposed to them by ECHO on the basis of criteria which are not entirely clear. No indications exist that any of the staff were aware of the source of the funds used to pay them.
4.1.5. The staff expenditure does not however represent the entire amount concerned and investigations are yet to account for all the missing funds. Though some has been traced to specific bank accounts, the true purpose of at least ECU 600 000 remains unknown. Documentation relating to the four doubtful contracts was subsequently found to be missing.
4.1.6. The Commission has placed the matter in the hands of the Luxembourg judicial authorities for prosecution of its criminal aspects. One official of ECHO has been suspended, while disciplinary proceedings are under way in relation to two others. A further official, formerly of DG I, has also been suspended pending enquiries into questionable links with Perry Lux which arose during the ECHO investigation.
|Parent company||1.8.93 - 31.1.94||(ECU 540 000) }||Dates of the contracts later|
|Subsidiary A.||1.12.93 - 30.11.94||(ECU 840 000) }||investigated by UCLAF|
|Subsidiary B||1.1.94 - 30.6.94||(ECU 500 000) }|
|Subsidiary A.||1.12.94 - 30.6.95||(ECU 541 080) }|
|2.2.94||Sub-delegation by the Commission of responsibility for financing decisions concerning humanitarian aid to the Commissioner responsible.
(Subsequently sub-delegated to the Director of ECHO.)
|9.2.94||Note from Mr Marín, Commissioner responsible for ECHO, to Mr Van Miert, Commissioner responsible for staff, requesting supplementary staff for ECHO.|
|17.2.94||Note from Mr Van Miert to Mr Marín pointing out the need to dispense with 'submarine' employees (i.e. staff not employed in accordance with the Staff Regulations financed from operating appropriations) in accordance with the instructions of the budgetary authority and, hence, with Commission policy.|
|18.2.94||Director of ECHO writes to deputy Chef de Cabinet of Mr Marín informing him of the current state of ECHO staffing, though with no reference to the 'external cell'.|
|24.2.94||Reply from Mr Marín to Mr Van Miert stating inter alia that he has given the Director of ECHO instructions to apply strictly the Commission policy on staff and to dispense with 'submarine' staff.|
|20.7.94||Activity Report from the contractor to the Director of ECHO (quoting the contract concerned and describing the activities of the 'external cell').|
|1994-5||Frequent correspondence on ECHO staffing. (e.g. Note to Mr Liikanen, new Commissioner responsible for staff, from Mrs Bonino, new Commissioner responsible for ECHO, dated 13.2.95. Continuing presence of 'submarine' staff acknowledged at least until June 1995)|
|28.7.95||Report of the 'General Inspectorate of Services' on the 'Functioning of ECHO' notes an excessive reliance on external staff and recommends the progressive reduction thereof.|
|3.1.97||Audit of ECHO by DG XX praises 'the existence of an independent finance unit' though commenting on 'too heavy dependence on staff not employed in accordance with the Staff Regulations'.|
|March/April 1997||Information received by UCLAF from 'reliable internal source' (whistleblower) casting doubt on the four contracts referred to above.|
|12.5.97||Court of Auditors publishes Special Report 2/97. No mention of 'external cell', though critical of en excessive number of staff not employed in accordance with the Staff Regulations (para. 4.4.) and a 'lack of transparency' in their recruitment (para. 4.6.).|
|May-Sept 1997||Preliminary UCLAF review of documentation|
|24.6.97||Meeting between Director of UCLAF and Director of ECHO concerning UCLAF inquiries.|
|Oct 1997||UCLAF inquiry formally opened|
|14-17.10.97||UCLAF control visits to contracting companies (the two subsidiary companies) in Dublin.|
|19.12.97||UCLAF mission report on above. Grounds for suspicion confirmed. Recommendation that the former Head of the financial unit be removed from financial responsibilities as a precautionary measure. This report remains internal to UCLAF.|
|27.1-4.2.98||UCLAF mission to the former Yugoslavia. Dispute between UCLAF and the Commissioner's private office concerning the appointment of an ECHO official to accompany the mission.|
|3.2.98||The former Head of the financial unit informs the former Director of ECHO of an UCLAF investigation into the dubious contracts.|
|4.2.98||The former Director of ECHO informs Mrs Bonino of the abovementioned note received from the former Head of the financial unit.|
|9.2.98||The former Head of the financial unit offers information to UCLAF on the fictitious contracts.|
|12.2.98||Mrs Bonino asks the Head of the financial unit not to do anything without referring to his own superiors first.|
|20.2.98||Mr Liikanen informed of the existence of an UCLAF inquiry by Mrs Gradin's Chef de Cabinet.|
|25.2.98||The former Director of ECHO informs Commissioners Marín and Bonino about a telephone conversation with the Director of UCLAF on the subject of the ECHO inquiry and a forthcoming meeting between them.|
|6.3.98||Exchange of letters between Commissioners Marín and Bonino, President Santer and Commissioner Gradin as to whether and when the Commissioners responsible for specific services must be informed about ongoing UCLAF inquiries.|
|9.3.98||The former Head of the financial unit requests details of expenditure under the four contracts from the owner of the parent contracting company with a view to an 'internal verification'.|
|11.3.98||The Director of ECHO submits a note to Mrs Bonino describing his contacts with UCLAF on the ECHO inquiry.|
|11-18.3.98||UCLAF interviews the former Director of ECHO, his former assistant (E259/N) and an administrator from the financial unit.|
|27.3.98||Mrs Gradin informs Mr Santer of UCLAF inquiries.|
|24.3.98||UCLAF initiates preparatory contacts with the Luxembourg judicial authorities.|
|6.5.98||UCLAF control visit to main contractor accompanied by ECHO official and Luxembourg official.|
|12.5.98||Main contractor notified under Commission internal 'Early Warning System' (to the effect that all payments by Commission services to it must be notified in advance to UCLAF).|
|15.5.98||UCLAF mission report on visit to former Yugoslavia.|
|18.5.98||UCLAF inquiry report setting out preliminary conclusions concerning fictitious character of four contracts and the involvement of four Commission officials; none of the money paid corresponded to its ostensible purpose (ECU 2.4 million), some of the money involved was used to finance the external cell, other funds were paid to identified companies and individuals for unknown purposes, some remains completely unaccounted for.
Report communicated to the Secretary-General, to Mrs Gradin's Chef de Cabinet (18 May), the Financial Controller, the Head of Legal Service (19 May), Mr Santer, President of Commission (by the Secretary-General on 20 May), the Court of Auditors (25 May), Commissioners Bonino and Marín and the former and current Directors of ECHO (27 May). Document soon quoted extensively in the press.
|19 & 29.5.98||The Director of UCLAF presents preliminary oral information to the Committee on Budgetary Control of the European Parliament (Cocobu).|
|2.6.98||Meetings between Mrs Bonino, Mrs Theato (Cocobu chair), Mr Bösch and Mr Fabra Vallés (Cocobu rapporteurs).|
|3.6.98||The Director of ECHO informs the owner of the main contractor that a special task force will attempt to reconstitute the financial documentation relating to the four contracts identified by UCLAF. This task force is never established.|
|18.6.98||The Commission Secretary-General instructs the present and former Directors of ECHO to comment on contents of UCLAF report. (Mrs Gradin agrees to the procedure.)|
|By 6.7.98||'Sufficient evidence' gathered to permit official forwarding of the file to the Luxembourg judicial authorities.|
|Early July||Series of interviews by the present and former Directors of ECHO of past and present ECHO staff concerning the proceedings leading to the UCLAF inquiry report of 18 May 1998.|
|10.7.98||Identification of payments to wife of former Head of the financial unit through main contractor (ostensible employment as translator). File formally forwarded to Luxembourg authorities (Letter from Secretary-General).
Suspension of the former Head of the financial unit, official responsible for ECHO financial unit. Disciplinary proceedings initiated.
|16.7.98||The present and former Directors of ECHO communicate their critical replies to the UCLAF inquiry report.|
|20.7.98||Luxembourg authorities formally open judicial inquiry.|
|24.7.98||Director of UCLAF replies to observations of the present and former Directors of ECHO (Note of 24.7.98 to the Secretary-General)|
|7.8.98||Commission suspends all payments to contractor.|
|26.8.98||Cocobu rapporteur publishes first working document on ECHO case with questions to the Commission.|
|3.9.98||The Secretary-General requests inventory of all contractual obligations of the Commission to companies belonging to the group of the main contractor.|
|8.9.98||Suspension of payments extended to associated companies.|
|10.9.98||Debit note for ECU 540 000 sent to liquidator of main contractor.|
|11.9.98||Commission replies to Fabra Vallés working document of 26.8.98.|
|14.9.98||Opening of administrative inquiry into ECHO affair headed by the Director- General of DG XVIII.|
|15.9.98||UCLAF informs a former official of DG I that he is under investigation following the establishment of questionable links with the main contractor.|
|25.9.98||Second Fabra Vallés working document.|
|30.9.98||UCLAF meet investigating magistrate nominated by Luxembourg authorities.|
|1.10.98||Former official of DG I suspended.|
|5.10.98||Luxembourg investigators visit the premises of main contractor.|
|6.10.98||File concerning former official of DG I forwarded to Luxembourg authorities.|
|23.10.98||Replies of Commission to second Fabra Vallés working document.|
|3.11.98||Cocobu rapporteur, Mr Fabra Vallés, invited by the Commission to view ECHO files, though without assistance (translation or secretariat).|
|9.11.98||Report of administrative enquiry finalised.|
|12-20.11.98||Opening of disciplinary proceedings against former Director of ECHO and his former assistant.|
4.2.1. The following issues arise in connection with the series of events outlined above:
4.2.2. ECHO was a new Directorate set up in 1992 to be responsible for the organisation and coordination of the Community's actions in the field of humanitarian aid. The following years saw the demands on it grow exponentially, without a corresponding increase in the staff available to it. Starting from scratch on the basis of a political initiative also meant that no well-established financial or organisational practices and procedures were in place, thus adding the usual teething troubles to what became a chronic lack of staff.
4.2.3. Against this background, ECHO tended to seek ad hoc solutions to the staffing problem, by using an unusually high number of temporary/auxiliary staff members and by resorting to the use of 'mini-budgets', i.e. the financing of outside staff for internal administrative tasks from operating appropriations (part B of the budget). This practice was permitted by the budgetary rules until 1993, at which Point it was abolished by the budgetary authority. The Commission's services were then instructed, at the request of Commissioner Van Miert to various Commissioners, to desist from such operations as from 1993. Nevertheless, in the short term, ECHO (and, in all likelihood, other services) continued to employ outside staff financed from both the administrative and, contrary to the new regime, operating parts of the budget to meet its staffing needs.
4.2.4. In the case of ECHO, the situation was different from other similar situations however, in that outright fraud was allegedly committed by the Head of Unit. That resulted in the four irregular contracts being used for the benefit of that official, without the knowledge - it may be assumed - of other officials. Apart from that aggravating circumstance, which is the subject of criminal and disciplinary proceedings, the central question is whether the continuing, and effectively tolerated, practice of using operating appropriations to finance staff represents a 'mere' administrative irregularity or something worse. Many of the key figures in the ECHO episode favour the former hypothesis. In essence, their argument is one of force majeure in that, without such irregularity, and given the lack of adequate resources, it would be impossible to carry out the task, which, in the case of ECHO, is of the utmost importance. All things considered, the Committee would take the opposite view: the de facto tolerance of irregular employment practices represents a serious danger for the Commission in that it presents an opportunity for fraud and creates an institutional culture which is unacceptable.
4.2.5. The truth is that, if a 'system' is in itself inadequate, it invites irregularity. If, as is the case in the ECHO Affair, the mechanism involves outright fabrication, the practice shifts beyond the realm of the merely irregular, and the invitation is swiftly irresistible to the fraudster. Therefore, even if all the money paid went to pay for work done by 'submarines', the tolerance of such a system is wrong because the risk of fraud is too high.
4.2.6. Abuse of Commission employment practices may unfortunately not be a 'one-off' or restricted case. The contractors in this case showed a significant level of sophistication, one which does not suggest an occasional operation. The links between the companies involved were concealed by the use of fiduciary arrangements, and the financial flows were concealed by the use of offshore accounting. More 'traditional', but no less unacceptable, techniques were possibly deployed in establishing contacts with individuals - more or less willing, more or less aware of what was happening - to provide the contractor with the necessary cooperation 'on the inside' of the Commission.
4.2.7. Moreover, according to the same contractor's own publicity material, it has (or has had) contracts with 16 separate services of the Commission (not to mention with Parliament and Court of Justice). This information, moreover, (broadly confirmed by the Commission's own inquiries) necessarily fails to include contracts with companies whose link with the main contractor is real but disguised. Inevitably, even where the contracts concerned are themselves legitimate, these contracts must be considered 'at risk'.
4.2.8. The situation was aggravated in the case of ECHO by the questionable use which was made of the 'framework partnership agreement' ('contrat cadre de partenariat'). This instrument was created specifically for ECHO on a proposal from Mr Marín in 1993. It was designed to give ECHO the necessary flexibility in working with partner organisations in the humanitarian field in situations where urgency was the prime consideration. The model agreement of 28 April 1993 gave ECHO a completely free hand in the choice of its partners, stipulating simply that '...ECHO joins forces and works together with international, governmental and non-governmental organisations or other bodies involved in humanitarian aid, with the Member States of the European Community and with non-member countries. (7)' The text goes on to say of the partner: 'Its mission is to come to the aid of people in danger, on an international scale and without discrimination by race, nationality, religion or political opinion, with the aim of saving human lives and relieving suffering' and 'It has considerable experience in humanitarian aid and offers services of a specialised nature.' (8)
4.2.9. Whether the several contractors which provided administrative services for ECHO (not only in the case of the four contracts in question) can be said to meet these criteria is extremely open to question. The decision in the ECHO affair to use the Framework Partnership Contract with commercial organisations providing services of a non-humanitarian nature is thus equally questionable, relying simply on the inclusion of the term 'other bodies' in the preamble. The dubious nature of the practice is emphasised by the fact that, when Mrs Bonino proposed revised rules to the Commission in March 1998, the words 'other bodies' involved in humanitarian aid were dropped, and the control/reporting requirements on partners increased.
4.2.10. The first striking feature of the chronology above is the length of the time lapse between the signature and the implementation of the contracts alleged to be fictitious and the beginning of an UCLAF investigation. The first of the contracts ran from 1 August 1993; the first hint of suspicion arose nearly four years later, and then only when a whistleblower intervened. Regular management and control mechanisms thus failed to identify any anomaly in the contracts which, at the very least, were not used for their ostensible purpose. This occurred, moreover, in a situation where the presence of an external cell of eleven persons, complete with offices, equipment, etc., must have been clearly apparent to all ECHO staff.
4.2.11. UCLAF enquiries began in May 1997, and the first consultations with the Director of ECHO relating to the four contracts took place on 24 June 1997. No preventive management action is demonstrated by the files at this stage within ECHO. Nor does any record exist of the Director of ECHO having informed the Commissioner responsible that an inquiry was in course.
4.2.12. Following a control visit to the two contracting companies in Ireland, UCLAF's internal mission report of 19 December 1997 recommended that the former Head of the financial unit be removed from a position of financial responsibility as a precautionary measure. Even if, as UCLAF maintains, he no longer occupied such a position, he was nevertheless still in an influential position within ECHO, able to take 'remedial' action in his own interests, and it is curious that as clear a recommendation as this was not communicated to anyone outside UCLAF. The only credible explanation is that the Director of UCLAF preferred to maintain the confidentiality of the inquiry even vis-à-vis very senior Commission staff and Commissioners.
4.2.13. The UCLAF control mission to the former Yugoslavia at the end of January unambiguously confirmed the fictitious nature of the contracts under investigation. The management of ECHO and Mrs Bonino's private office were clearly aware of this investigation, thanks to the participation of an ECHO official. Nevertheless, no management action in respect of the official concerned is recorded within ECHO to address the situation.
4.2.14. Nearly two months elapsed between the completion of UCLAF's inquiry report on 18 May 1998 and the decision to place the matter before the competent judicial authorities, although the information in the UCLAF report already constituted a clear and at least partly substantiated allegation of fraud. Similarly, the former Head of the financial unit remained in his position until 10 July 1998, thereby having further time and opportunity to interfere with possible evidence.
4.2.15. The Secretary-General instructed the current and former Directors of ECHO to verify the contents of the UCLAF report on 18 June 1998. This led to a series of interviews with current and former ECHO staff (internal and external). These interviews with often junior staff, which largely concerned the possible involvement in, or knowledge of, the fictitious contracts on the part of the former ECHO Director, were conducted predominantly by the former Director himself. The question must arise as to (i) whether it was appropriate in principle for such an investigation to be conducted by one of the persons named in the UCLAF report (who thus in effect 'investigates himself'), and (ii) why the Secretary-General chose this course of action.
4.2.16. In these circumstances, and with the benefit of hindsight, the ECHO investigation therefore did little more than delay the commencement in September 1998 of the full administrative inquiry (see below), which, under an independent Director-General, covered essentially the same ground.
4.2.17. The former Head of the financial unit was suspended on 10 July 1998, the same day as the file was forwarded to the Luxembourg authorities. However, no administrative inquiry was launched concerning the other persons named (rightly or wrongly) in the UCLAF report until 14 September 1998. The resultant report was released on 9 November 1998 and led to disciplinary proceedings against two further officials shortly afterwards. Disciplinary action cannot ultimately be regarded as having been expeditious, even if it did follow rapidly on from the conclusion of the administrative report. In the event, on the central issue of whether two key officials had been aware of the fictitious nature of the four contracts, this well-documented report reaffirms the findings reported by UCLAF some six months previously.
4.2.18. Unquestionably, the Commissioners responsible for ECHO, Mr Marín until 1994, and Mrs Bonino thereafter, were aware (i) of the extremely difficult staffing situation in ECHO and (ii) of the existence of staff within ECHO financed from operating appropriations. Both Commissioners made repeated, formal and explicit requests to the Commissioner responsible for personnel for the allocation of additional staff for ECHO. Though Mr Marín gave explicit instructions that the practice of using 'submarine' staff should cease (on 24 February 1994), there is no record of him having pursued the matter thereafter or having checked whether his instructions had been followed; the record shows that they were not. Indeed, the then Director of ECHO signed the last of the suspect contracts, which he himself acknowledges to have been a 'mini-budget' operation (though he denies knowledge of any associated fraud), after having received instructions to desist from using 'submarine' staff.
4.2.19. Pressed on this point by the Committee (9), Mr Marín declined to say that he 'turned a blind eye' to the presence of 'submarines', but he did indicate that the practice was understandable in the very difficult staffing circumstances of ECHO and that experience showed that periodic 'cleaning exercises' were (and remain) necessary in the Commission. Moreover, given that Mrs Bonino, the incoming Commissioner, was explicitly informed that 'submarines' were present, it is fair to suggest that the practice of employing such staff - albeit quite possibly for very 'honourable' motives - was tacitly tolerated at least until the last of the contracts financing the 'external cell' expired on 30 June 1995. Thereafter, ECHO obtained a supplement of regular staff and, although (unsuccessful) efforts were made to persuade the budgetary authority to provide staff under what is known as the 'Liikanen facility' (10) , functioned without 'submarine' staff.
4.2.20. There is no indication that any Member of the Commission or any member of the private offices was aware of the existence of the fictitious contracts (as opposed to 'merely' irregular staffing arrangements) until after the beginning of the UCLAF investigation. (11) The first hint in the files that Commissioner Bonino became aware of an UCLAF inquiry occurred on 4 February 1998, at which point the former Director of ECHO informed her of contacts he had had with the former Head of ECHO's financial unit, when an UCLAF inquiry into certain ECHO contracts in Yugoslavia had been discussed. Soon afterwards, on 20 February 1998, Mrs Gradin's Chef de cabinet informed Mr Liikanen and the Secretary-General confidentially - in connection with a promotion procedure - of the inquiry. At this point, Commissioners Bonino and Marín initiated a series of letters in which they referred to 'rumours' concerning fraud in ECHO and sought clarification from Mrs Gradin. Thereafter, on 25 February 1998, the information available to the two Commissioners became more explicit when the former Director of ECHO informed them of his contacts with the Director of UCLAF.
4.2.21. In the view of the Committee, however, it stretches credibility to suggest that the Commissioners in question remained completely in the dark as to the existence of an UCLAF inquiry (itself an indication of some suspicion of fraud) during the eight-month period from 24 June 1997, when the Director of ECHO first became aware of an UCLAF inquiry, until the February of the following year.
4.2.22. Two specific allegations appear in the file concerning Mrs Bonino and her private office.
4.2.23. Firstly, the Director of UCLAF stated that Mrs Bonino's Chef de cabinet attempted to undermine and delay the UCLAF control mission to Yugoslavia by creating difficulties concerning the participation of an ECHO official, on the pretext that the matters under investigation were of a minor administrative nature. This 'interference', if it occurred, would not necessarily imply a wish to conceal a case of fraud but may be indicative of the view that (i) the matter was not of sufficient seriousness to merit an investigation, or (ii) that the inquiry should be conducted differently. In either case, it is clearly regrettable that UCLAF and the private office concerned viewed each other as antagonists in this affair. Moreover, for reasons of prudence, it is inappropriate for a private office to challenge the conduct of an UCLAF inquiry without being in full possession of the facts. However, there is merit in Mr Marín's and Mrs Bonino's contention that the Commissioners concerned should, in one way or another, be made aware at an earlier stage of the nature of involvement of officials in the services for which they are responsible in UCLAF investigations, obviously within the limits of the confidentiality that the investigation requires.
4.2.24. Secondly, UCLAF's records note that the former Head of the financial unit claimed to have been contacted directly by Mrs Bonino shortly after the Yugoslavia mission, asking him to take no action without first consulting her. UCLAF's records do not include the alternative interpretation of this contact (which is acknowledged to have taken place) which is that it was simply an instruction to an official to respect - rather than circumvent - the Commission's internal procedures for exchanges of internal correspondence.
4.2.25. It must be said, notwithstanding the formalised circumstances in which the abovementioned allegations were made, that they remain unilateral and subjective declarations and cannot be taken to constitute 'evidence' of interference.
4.2.26. Under Article 206 of the Treaty (concerning Parliament's power to file discharge), the mission 'shall submit any necessary information to the European Parliament at the latter's request'. Parliament has interpreted this article as including a right to be informed as to the existence and/or progress of inquiries into cases of fraud and corruption affecting the financial interests of the European Community.
4.2.27. At the outset, it should be said that the provision of information to Parliament by the Commission has not been spontaneous but driven by outside pressures. In the first case, the pressure came as a result of the leakage of the UCLAF inquiry report of 18 May 1998 to the press (it was even published virtually in its entirety); secondly, it came from direct and persistent questioning by the rapporteur for the Committee on Budgetary Control, Mr Juan Manuel Fabra Vallés. In itself, on a restrictive reading of the Treaty, the Commission's failure to inform Parliament without good reason, while perhaps regrettable, is not an irregularity.
4.2.28. However, the rapporteur's subsequent requests to obtain the relevant UCLAF reports (even those already published in the press) were met with protracted refusals. Ultimately, a heavily censored version of the 18 May 1998 report and its annexes was made available to Parliament's rapporteur, but so heavy was the censorship, on the grounds of protecting the legal procedures in course, that the documents in question were completely incomprehensible. Finally, more than two months after the original request had been made, the Commission agreed that the rapporteur might visit the Commission's premises to view the documentation, without taking copies or notes. It was furthermore stipulated that he could not be accompanied by either an assistant or an interpreter. In the circumstances, he refused to view the documents under such conditions.
4.2.29. In contrast to this reluctance officially to provide information to the discharge authority, leaks of information play an important part in the ECHO affair. Firstly, the UCLAF inquiry report of 18 May 1998 itself was the subject of a leak to the press. It is presumably this leak to which Mrs Bonino alludes in a letter to Mrs Gradin dated 15 September 1998, referring to a 'surprising information meeting [which] may have taken place between UCLAF officials and EP members and officials, during which essential documents from ECHO file [ sic] have been disclosed'. At the same time, other correspondence between private offices indicates that the leak in question came from one of the participants in a 'super-restricted' Commissioners-only meeting, leading to the first public appearance in the press of the name of the official most heavily implicated.
4.2.30. Similarly, a small extract from the internal UCLAF mission report of 19 December 1997, including the recommendation to remove the former Head of the financial unit from a position of financial responsibility, came into the hands of the EP rapporteur though unofficial channels.
4.2.31. The Committee has no interest in examining who leaked what to whom and when (the above are only examples), but it can at least conclude that the management of information and its provision to Parliament was not transparent.
4.2.32. Closely related to the questions outlined above is the lamentably poor state of internal communication within the Commission. In the case of ECHO, the bulk of the correspondence between Commissioners revolves around the issue of when relevant information was made available to the Commissioners concerned and by whom. In fact, most information on the progress of the case was generated in the first instance (and protractedly thereafter) via various unofficial means: rumours, off-the-record briefings, misinformation, leaks and indiscretions, etc. Besides being an inefficient means of communication (preventing early remedial action), rumour inevitably distorts reality, thus giving rise to unnecessary antagonisms and sometimes wild accusations. It is to be hoped that the Commission's new guidelines on the dissemination of information on UCLAF inquiries will go some way to towards the introduction of a more transparent culture.
4.2.33. One aspect of 'mini-budget'-type operations which do not set out clear criteria for the employment of staff under the contracts concerned is the opening they provide for 'patronage'. In the case of fictitious contracts, such as those in the ECHO case, which were ostensibly for operations in third countries, such criteria are absent by definition.
4.2.34. It is interesting to observe in the files that the correspondence in which ECHO requested the provision of staff from the contractors typically contains two parts: firstly, a formal letter requesting the provision of persons to fill specified functions at specified grades; second a series of names (with CVs if not previously supplied) of persons with matching qualifications. If, as was the case here, the contractor is compliant, the scope for abuse is clear.
4.2.35. In his declarations to UCLAF, the former Head of the financial unit stated that the then Director of ECHO 'controlled' all the appointments to the 'external cell'. He added that he himself made a relatively small number of recommendations. The Director's declarations contrast with this, suggesting that he played a role in no more than three cases, and then simply recommended names, without entering into terms and conditions. Either way, the issue of principle is the same.
4.2.36. Firstly, it cannot be healthy for personal interventions to play such a powerful role in the appointment of staff, especially when there are no checks against any objective criteria. Secondly, it is extremely difficult to know whether the acknowledged personal interventions (even less any which remain unacknowledged) represent 'favouritism' in the sense used in this report ( see paras.1.4.4-5).
4.2.37. For example, the former Head of the financial unit makes no bones about having recommended (successfully) friends of his son. In itself, being a friend of an official's son does not and should not disqualify an individual from a job, and the signs are that the persons in question gave full satisfaction in their assigned roles. Nonetheless, it is impossible not to be uneasy about such personalised recruitment procedures which, although nominally in the private sector, are in fact for the exercise of public-sector tasks. The unease derives mainly from the sheer openness to abuse - the possibility it provides to 'place' friends and relations who do not possess the requisite qualifications or abilities, these being failings which are ultimately at the expense of the taxpayer (and, in ECHO's case, by the beneficiaries of humanitarian aid).
4.2.38. Further unease arises from the distortion in the 'level playing field' that such practices represent. Qualified people who do not belong to the 'charmed circle' find more and more barriers to entry, to their own detriment and to that of the public at large.
4.2.39. However that may be, the Committee has seen no convincing evidence in the ECHO file that the Commissioners, or their private offices approved or knew of favouritism in their services. Hints in this direction occur in the files, but these have been checked by the Committee, including in interviews with the Commissioner concerned, and could not be substantiated.
4.3.1. The various aspects of the case described above raise the question of the responsibility of the Commissioners concerned and/or of the Commission as a whole. That responsibility arises, as follows from all the considerations above, neither in respect of the fabricated nature of the four contracts involved, nor in respect of favouritism. It does arise, however, regarding the issue of tolerating staffing practices which are known, or should be known, to be irregular. In this respect, Mr Marín allowed the presence of 'submarines' to continue throughout the period during which he was responsible for ECHO. Mrs Bonino, however, upon taking over responsibility, acted to ensure that staff were no longer employed by ECHO after the expiry of the last outstanding contract in June 1995.
4.3.2. The issue, as the ECHO file shows better than any other file, is whether irregular staffing practices can be justified because of the contribution of the EU to humanitarian actions which respond to cases of extreme need. At the level of the Commissioners, the question is whether they followed up with sufficient rigour the general prohibition of irregular staffing practices as laid down, not only by the Commission as a body but also by the budgetary authorities. At the level of the Commission as a body, the question is whether it suffices to lay down such a prohibition without at the same time providing enough staff to enable the prohibition to take effect. This is a question which applies equally to the former and to the present Commission. It seems to the Committee that the responsibility of the Commissioners, and of the Commission as a whole, is involved on both scores: the Commission has not provided the staff and the Commissioners have not made it sufficiently clear, either to the Commission or to the other institutions, that they could not take responsibility for carrying out all of the tasks assigned to ECHO, or that the policy objectives imposed upon them could not realistically be implemented.
7. Model Framework Partnership Contract: Preamble - 'ECHO'
8. Model Framework Partnership Contract: Preamble - 'The Partner'
9. Hearing of Commissioner Marín (24 February 99).
10. Facility agreed by the budgetary authority allowing a set proportion of operating appropriations to be used for administrative expenditure, applied only to the Phare, Tacis and MEDA programmes (see remarks entered against the relevant budget items in 1997).
11. The Committee received credible oral information suggesting that, as early as 1993, concerns had been notified to the private office of the Commissioner responsible at the time for personnel as to the activities of the official subsequently most implicated in the alleged fraud. These concerns were said to have been notified to the private office of the Commissioner then responsible for ECHO. It was further indicated that another Commissioner's private office had earlier opposed the same official receiving any financial responsibilities because of doubts concerning his previous activities. It has proven impossible to substantiate that information.
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